M&A In Real Estate Market

Event: Viet Nam Real Estate and Construction Investment Forum will be held at The International Conference Center 11B Le Hong Phong, Ha Noi on August 26 by the Ministry of Planning and Investment (MPI).

Speaker: Neil MacGregor – Deputy Managing Director of Savills Viet Nam

Topic: Market information and opinions on the capital sources for real estate development as well as the merger and acquisition (M&A) activities in real estate market.

The Vietnamese real estate market is critically short of capital and developers are therefore seeking new sources of finance. Whilst in the past many developers were reluctant to seek finance from the banks, projects are now leveraged at unprecedented levels. There are a number of options open to developers requiring capital to move their projects forward, none of which necessarily require financing from banks, if the right partner can be found.  These include an outright sale of the project to a third party, seeking a joint venture partner, en bloc sales of residential units, or strata sales of retail and office space. Many Vietnamese developers continue to hold large land banks and are able to sell development land to third parties in order to raise capital to finance the construction of other projects.

According to Savills Vietnam, M&A in real estate is witnessing a rapid growth worldwide, around 23.8% between 2009 and 2010, while in Asia Pacific, deal value increased from $12 billion to $22.7 billion, and in the USA, the figure nearly tripled in 2010 (from $3.8 billion in 2009 to $11.0 billion in 2010).

In Vietnam real estate was one of the most active sectors in 2010 in terms of both transaction quantity and transaction value. In these transactions, Vietnamese investors and developers are more and more active as buyers, not just foreign players with large capital capacity as previously. Although facing a number of challenges such as an immature legal framework, low market transparency, complicated licensing procedures and differences in price expectations; it is believed that the next few years will see a rising number of M&A deals happening. Whilst the lack of bank finance is troublesome for many in the real estate industry, it also creates an unprecedented period of opportunity for others, particularly those with cash. 

Savills Vietnam is a well-known international real estate service provider with more than 15-years experience in Vietnam. Particularly, in the field of real estate investment consultancy and M&A, Savills have a strong dedicated team of experts with in-depth experience and relationship with investors and developers, including domestic, regional and global players. In 2010, Savills Vietnam successfully brokered a number of real estate deals, with total transaction value exceeding US$ 100 million. Operating as the one-stop exchange for real estate investors and developers for deal sourcing, Savills Vietnam is in the best position to direct capital flows to where they are needed most.

Given that the Vietnam real estate market is now in a downturn, caused by constrained bank financing,expect to see many more mergers and acquisitions in the real estate sector over the next 12 months in Vietnam.